Thursday was not a good day for Asana (ASAN), to say the least. The software maker's shares were crashing hard following the release of F4Q22 (January quarter) results, even though the company’s financial statement surpassed expectations.
Asana delivered revenue of $111.9 million, a 64% year-over-year uptick and coming in higher than the guided range of $104.5 million to $105.5 million. The figure also came in above Wall Street’s $105.2 million estimate. There was a beat on the bottom-line too, as adj. EPS of -$0.25 outdid the Street’s -$0.28 call.
For F1Q23, the company is expecting revenue between $114.5-$115.5 million compared to the consensus estimate of $111 million, so that’s good too. But here comes the downer: The company expects losses to widen as CEO Dustin Moskovitz sticks to his “investing to win” strategy. As such, for the quarter, Asana anticipates non-GAAP EPS between ($0.36) and ($0.35), worse off than consensus at ($0.27).
It's a harsh environment for stocks these days which don’t deliver on all metrics. Investors are likely to put Asana in the penalty box for a while on account of the widening operating losses, says JMP’s Patrick Walravens. However, the 5-star analyst lists several reasons why he “continues to like this business over the longer term.”
These include: “1) we believe in Asana’s mission to enable the world’s teams to work together effortlessly; 2) our view is Asana's products are differentiated, particularly in the enterprise, by its work graph and multi-homing capabilities; 3) the company is pursuing a very large market estimated to reach ~$51B by 2025; and 4) we believe Mr. Moskowitz will navigate Asana to a strong outcome for shareholders over time and has shown his conviction by buying the stock.”
Indeed, Moskovitz has put his money where his mouth is. Walvarens estimates the founder increased his ownership of Asana to ~54% in February compared to the ~33% stake he held in May 2021.
All in all, Walvarens maintains an Outperform (i.e. Buy) rating on ASAN, although given the “multiple contraction” seen amongst peers, the price target is reduced from $95 to $63. No worries, the figure still implies 68% upside from current levels. (To watch Walvarens’ track record, click here)
Turning now to the rest of the Street, where the $60.92 average target is just a touch below Walverens’ objective and set to generate returns of 64% over the coming year. Overall, the analyst consensus rates ASAN stock a Moderate Buy, based on 7 Buys, 4 Holds and 1 Sell. (See Asana stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.